Question

Please answer questions 1 - 5. Thank you.

1. What are the three types of financial assets? Please give one example or each asset category.

2. What is the difference between commercial papers and treasury bills?

3. List five money market instruments.

4. What are the benefits that are unique to municipal bonds?

5. What are the differences between common stock and preferred stock?

Answer 1

1. 3 type of financial assets will be equity assets, debt instruments and preferences share.

equity instruments will be providing ownership into the company and example of equity instruments will be equity shares.

debt instruments will be providing with the rights of creditors and example of debt instruments will be bonds.

Preference shares will be having both the quality of sales and Bonds.

2. Commercial papers are offered by corporates whereas treasury bills are issued by governments and commercial papers are having a high degree of risk whereas treasury bills will be considered risk free.

3.5 money market instruments are bankers guarantee common treasury bills, certificate of deposits, commercial paper, repurchase agreement

4. Municipal bonds are risk-free and they will be also offering with the tax exemption so municipal bonds are tax exempt and that's the unique feature

5.common stock will be providing ownership where as a preference share will not be providing any kind of ownership into the company

preference shares will be mandatorily receiving dividend whereas equity shares will not have mandatory dividends

Preference shares have preferential claim on asset in case of dissolution of business where as equity share will be having a residual claim.